Investor's Business Daily, July 12th, 2007
It's been a good week for metals stocks, which again occupy a number of spots in Your Weekly Review.
Since last week's publishing of Weekly Review, the best-performing industry groups include metal ores, specialty alloys, steel makers and metal processing industry groups. All those are up at least 4% over the past five sessions.
Buyout news in the sector helped boost this segment of the market's leadership.
On Thursday, Alcoa AA shares gapped up after Alcan AL agreed to Rio Tinto's RTP higher bid, which topped Alcoa's hostile offer. Alcoa's shares also surged, while Rio Tinto's eased.
On Wednesday, Chaparral Steel CHAP agreed to a $4.2 billion buyout by Gerdau Ameristeel GNA.
The deals helped overshadow disappointing sales in Alcoa's quarterly earnings, released late Monday.
Among the newsmakers, only Alcoa's chart has some significance.
The stock found support at its 10-week moving average, rallying from that level on strong volume. Shares are 5% past a buy point 15f 43. But Alcoa's sharp decline in earnings (EPS fell 5% in the latest quarter) and sales make it a risky choice for growth investors.
Chaparral and Alcan are on their way to being absorbed by other companies, meaning their shares won't be trading much longer.
Gerdau Ameristeel is trying for support at its 10-week line, while Rio Tinto is still near a 314.59 buy point 18om 10-week support.
Keep an eye on Steel Dynamics STLD. The stock has been forming a third-stage base for eight weeks, although EPS gains have slipped.
U.S. Steel X also appears to be forming a base. But its fundamentals have weakened. Earnings per share growth was 406%, 142% and 13% the past three quarters. Sales growth inched up just 1% in the first quarter.
